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New Model for Oracle Sourcing Jump-starts Savings
During difficult economic times, procurement teams need to redouble their efforts to maintain profit margins, fight the impact of inflation, and keep operating costs as low as possible. That’s why U.K. hotel and restaurant giant Whitbread moved quickly when it faced a 30 percent hike in an important food commodity, which threatened to drive away price-conscious consumers.
When the price forecasts surfaced, Whitbread decided to spurn its traditional way of sourcing a raw material in favor of something new: a technology-based strategic sourcing approach that locked down 2008-2009 potato contracts and yielded double-digit cost savings.
The core of Whitbread’s cost-cutting strategy was an eAuction, made possible by the Oracle Sourcing module of Oracle Advanced Procurement. To quickly launch the program, Whitbread tapped eThree, a global provider of spend management solutions, which provided a hosted instance of Oracle Sourcing as well as the expertise to apply Whitbread’s sourcing strategy to the tool.
The combination of Oracle Sourcing with eThree’s sourcing expertise and hosting platform proved to be a powerful combination. The sourcing team was able to mitigate cost increases and realize a 16 percent savings, which is the equivalent of £400,000 per year.
“We are delighted with the outcome of this eAuction because it vindicates our belief that such technology can deliver significant value to the bottom line for our business,” says Paul Farrow, Whitbread’s head of procurement. “With commodity prices rising significantly, the pressure on margins for the hospitality industry is immense, so we’re particularly pleased to mitigate such substantial cost increases through the use of technology. It will help us to stay ahead of the competition by managing our costs more efficiently and to continue to pass on value to our customers.”
In addition to reducing costs, the hosted eAuction proved more efficient than traditional methods. Whitbread solicited 60 bids from the four vendors in an hour. Farrow estimates that it previously would have required a week to gather the same number of bids.
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